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The British Business Bank announces further details of Pay As You Grow scheme

Written by Latifa Yedroudj on Tuesday, 09 February 2021. Posted in Politics, Analysis

The scheme will help UK smaller businesses that have taken out Bounce Back Loans to manage their cash flow better

The British Business Bank announces further details of Pay As You Grow scheme

The scheme will help UK smaller businesses that have taken out Bounce Back Loans to manage their cash flow better 

Small firms will be given more time to repay state-backed loans in the new “pay-as-you-grow" initiative. The new facility will enable more flexible repayments on Bounce Back Loans for UK smaller businesses. Today, the British Business Bank has announced further details to help smaller businesses manage their cash flow and have a better chance of getting back to growth. 

Chancellor Rishi Sunak originally announced the “pay as you grow” initiative in September 2020, which will enable businesses who have started repaying their Bounce Back loans to give companies “breathing space to get back on their feet”, the Chancellor said. Business can request an extension of their loan term to 10 years from six years, at the same fixed interest rate of 2.5%, reduce their monthly repayments for six months by paying interest only (this option is available up to three times during the term of their Bounce Back Loan) and take a repayment holiday for up to six months (this option is available once during the term of their Bounce Back Loan) 

Borrowers can use these options individually or combine them with each other. Mr Sunak said the plan allowed firms to "pay-as-your-grow", offering flexible repayment options as the economy strengthens. Lenders will start to communicate Pay As You Grow (PAYG) options to Bounce Back Loan Scheme borrowers three months before repayments commence. Lenders will inform their customers about PAYG directly, so borrowers should wait until they are contacted by their lender before enquiring about the scheme. Lenders will advise customers about how their payment profiles may change according to their choices under the scheme. Businesses first began to receive BBLS loans in May 2020 and the first repayments will become due from May 2021 onwards. 

The Bounce Back Loan Scheme, which was launched on 4 May 2020, provides financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the Covid-19 pandemic. Since May 2020, the scheme has supported nearly £45bn of loans to 1.5m businesses 

Business leaders have praised the scheme for allowed greater flexibility and opportunity for small businesses to effectively manage repayments during this difficult time. “Pay As You Grow will provide tangible benefits to Bounce Back Loan recipients, many of whom may have accessed the Bounce Back Loan Scheme to borrow money for their business for the first time,” Richard Bearman, Managing Director, Small Business Lending, British Business Bank, said. “The scheme offers greater flexibility to businesses who may need flexibility in paying off their Bounce Back Loan and enables them to manage their repayments more effectively.” 

“The comprehensive and generous financial support package we have delivered across the UK has protected jobs, saved businesses and kept local economies on the move. While our vaccine rollout is moving at an incredible pace and the end is in sight, we know times are still tough for many companies and extra support is needed. These flexible repayment options will give businesses the time they need to recover from the pandemic before paying back loans, giving them the breathing space and confidence to build back better,” Business Secretary Kwasi Kwarteng added. 

Stephen Pegge, Managing Director of Commercial Finance at UK Finance, commended UK’s banking and finance industry for providing struggling businesses with the tools to stay afloat and navigate this tough period. “The UK’s banking and finance industry is delivering an unprecedented level of support to businesses across the UK to help them navigate the crisis and set them up for recovery,” Mr Pegge said. “Nearly 1.5 million businesses have received a Bounce Back Loan (BBL) since the scheme launched in May last year. As the outlook for many businesses remains challenging, the flexibility of Pay As You Grow will help smaller businesses manage their cash flow and repayments. Lenders will be contacting BBL borrowers in advance of their first payments to outline their options. Government-backed loans are just one part of the industry’s wider support for businesses alongside commercial lending, capital repayment holidays, extended overdrafts and asset-based finance – meaning there is a range of help available for any firm that needs it.”

About the Author

Latifa Yedroudj

Latifa Yedroudj

Latifa Yedroudj has joined the Elite team to fully immerse herself in the business side of journalism, a strong passion of hers cultivated from young having co-run her mother's start up business since she was 18. Her interests lie in a wide range of subjects, including start ups, business, travel, and anything entrepreneurial she can get her hands on. She has worked for some of the biggest names in journalism including The Guardian and The Mirror. Follow her on @latifayed on Twitter for her latest journo rants.

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